• The Commission required disclosures of short positions to the SEC, complementing the existing requirements for reporting of long positions.
• The Commission adopted several rules and amendments to strengthen investor protections against abusive naked short selling, and to impose significant penalties for their violation.
• The Division of Trading and Markets, in coordination with the CFTC, the Federal Reserve, and firms in the private sector, worked to create central counterparties for over-the-counter credit default swaps.
• The Division of Enforcement took sweeping measures against market manipulation, initiating more than 50 pending SEC investigations in the subprime area, and requiring hedge fund managers, broker-dealers, and institutional investors with significant trading activity in financial issuers or positions in credit default swaps to disclose, under oath, trading data, positions, and other information to the SEC. The Division also announced the largest settlements in the history of the SEC in behalf of investors in auction rate securities that became illiquid during the credit crisis.
• The Commission brought a landmark enforcement action against a trader who intentionally spread false rumors to drive down the price of a stock, and charged Bear Stearns hedge fund managers with fraudulently misleading investors about the financial state of the firm’s two largest hedge funds and their exposure to subprime mortgage-backed securities.
• Overall, the SEC initiated the second-highest number of enforcement cases in the agency’s history, and for the second year in a row returned over $1 billion to injured investors.
• The agency used its new authority under the Credit Rating Agency Reform Act to expose weaknesses in the ratings process, and to enact strong new rules reining in conflicts of interest and requiring disclosures to promote investor understanding and competition in the credit rating industry.
• The Office of the Chief Accountant and the Division of Corporation Finance, working with the Financial Accounting Standards Board, provided guidance to financial institutions on making broader disclosure to investors, including with respect to hard-to-value assets. The Office of the Chief Accountant also worked closely with the FASB to deal with such issues as consolidation of off-balance sheet liabilities, the application of fair value standards to inactive markets, and the accounting treatment of bank support for money market funds.
• In late 2008, the SEC delivered to the Congress a comprehensive study of the impacts of fair value accounting on financial firms in the current crisis.
• The Office of Compliance Inspections and Examinations conducted a broad examination of the effectiveness of broker-dealers’ controls on preventing the spread of false information, as well as examinations of money market funds to analyze portfolio holdings.
• The Division of Investment Management worked closely with the Treasury Department to assist with the development and operation of the Temporary Guarantee Program for Money Market Funds.